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ESG is more than ‘good karma’ and analysis can help pick a winner

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ESG is more than ‘good karma’ and analysis can help pick a winner

Financial Times / FTfm

February 28, 2019

By Jason Hsu (article contribution to FT)


Better returns can be identified if investors focus on the cost of capital

ESG investing has grown in popularity in the past five years. Investment based on environmental, social and governance criteria accounts for $12tn in assets under management in the US, according to the Forum for Sustainable and Responsible Investment, while the Global Sustainable Investment Alliance shows a worldwide figure of nearly $23tn. Both numbers make up about a quarter of the respective market totals.

Despite the desire and discourse — European pension funds and Japan’s Government Pension Investment Fund in particular have been supportive of ESG — one impediment has been a perception that investment results sometimes suffer.

Specifically, this research shows that investing in ESG firms “in need” — those receiving little publicity or love from the capital market — can maximise the social value of ESG investment by supplying capital to the groups that need it most while delivering better returns over time.


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